Enviro groups pressure Tucson to not invest in coal mine

A coalition of Arizona clean energy and community leaders on Dec. 17 called on Tucson Electric Power (TEP) to invest in renewable energy and energy efficiency rather than sink ratepayer money into purchasing the San Juan coal mine in New Mexico.

Tucson Electric faces a decision of whether or not to purchase the mine which feeds the San Juan Generating Station in New Mexico as utilities struggle to identify a post-2017 fuel supply for the 40-year old coal plant, said the Sierra Club in a Dec. 17 statement. The utility has expressed interest in purchasing the San Juan mine, which the club said would prolong the life of one of the region’s biggest threats to clean air and clean water, while tying up resources that could be invested in the local Tucson clean energy economy.

“TEP faces a critical choice: continue to threaten public health by mining and burning dirty coal or truly commit to investing in clean energy like solar. Rather than locking Arizona ratepayers and the surrounding community into a future of even more dangerous, expensive out-of-state coal by purchasing the San Juan coal mine, TEP should take this opportunity to create new jobs here in Arizona by investing in clean energy like solar to power our homes,” said Dan Millis, Organizer with the Sierra Club’s Grand Canyon Chapter.

In a letter submitted to TEP President David Hutchens, the coalition highlighted the opportunity it said the utility has to tap into Arizona’s vast renewable energy potential, while also detailing the profound economic and public health consequences of continuing to mine and burn coal at San Juan. In addition to the groups submitting the letter, more than 650 Southern Arizonans sent letters to Hutchens opposing the mine’s purchase.

The San Juan Generating Station is a minemouth plant that procures all of its fuel from the adjacent San Juan mine, which is currently owned by international miner BHP Billiton. Earlier this year, the U.S. Environmental Protection Agency approved a plan to retire units 2 and 3 of the San Juan plant as part a regional haze settlement agreement. Under the plan, units 1 and 4 of the plant will continue burning coal.

Tucson subsequently said it would not purchase the mine, prompting this Dec. 18 statement from Dan Millis, Organizer with the Sierra Club’s Grand Canyon Chapter: “We applaud TEP for looking past purchasing the San Juan coal mine, which would prolong the life of one of the region’s biggest threats to clean air and clean water and tie up important resources that could be invested in the local clean energy economy in Arizona.”

More than one power plant co-owner may buy the mine

Several Public Service Co. of New Mexico (PNM) officials on Oct. 31 filed testimony at the New Mexico Public Regulation Commission related to the San Juan situation. Among them was Chris Olson, the Vice President-Generation for PNM.

The net generation capacity and in-service dates for each of the four units at San Juan are:

  • Unit 1 – 340 MW, on line in 1976
  • Unit 2 – 340 MW, on line in 1973
  • Unit 3 – 496 MW, on line in 1979
  • Unit 4 – 507 MW, on line in 1982

Under a regional haze deal with the U.S. Environmental Protection Agency, instead of installing expensive selective catalytic reduction technology on all four units, the plant owners will shut units 2 and 3 and install cheaper selective non-catalytic reduction (SNCR) for NOx control on units 1 and 4.

Coal is supplied to San Juan pursuant to the Underground Coal Sales Agreement (UG-CSA), which expires at the end of 2017. The expiration of the UG-CSA corresponds with the retirement of San Juan Units 2 and 3. By the way, the San Juan owners that wil stick around for the long term at the plant are known as the “Remainers” by Olson.

“A post-2017 fuel supply is an essential element for the continued, long-term operation of San Juan,” wrote Olson. “PNM and the other Remainers have specially recognized this in the context of the San Juan ownership restructuring agreements. To that end, PNM, along with representatives of the other Remaining Participants, are engaged in confidential negotiations with the objectives of confirming a fuel supply for post-2017 plant operations and obtaining indicative pricing for this supply. The anticipated timeframe to meet this objective is by this year’s end. PNM and the other Remaining Participants are in the process of negotiating with SJCC and BHP concerning a future fuel supply for San Juan.

“On October 1, 2014, the San Juan Fuels Committee approved a resolution authorizing an amendment to the UG-CSA that provides for the negotiation of a potential purchase transaction for the mine assets to be consummated on or before December 31, 2016. The purchaser could be one or more of the San Juan owners, an affiliated company, or a third-party agreed to by the parties. On October 2, 2014, the parties entered into an agreement that provides the San Juan participants with access to data necessary to evaluate the mine assets and liabilities. If the mine assets are acquired from [San Juan Coal Co.], it is contemplated that a third-party miner would be engaged to conduct mining operations on a contract basis or would assume ownership of the mine assets and carry out the mining operations.”

When a decision has been made regarding a long-term fuel supply, the costs of implementing the fuel supply strategy will be based on a MW share of the plant in 2018 as follows:

  • PNM, 58.671%;
  • Tucson Electric Power, 20.068%
  • City of Farmington, New Mexico, 12.749%
  • City of Los Alamos, New Mexico, 4.309%
  • Utah Associated Municipal Power Systems, 4.203%

Those dropping out of ownership in the meantime will be the city of Anaheim, the Southern California Public Power Agency, the M-S-R Public Power Agency and Tri-State Generation and Transmission.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.